America should be embarassed the way it treats its workers during the Coronavirus. To see how other countries treat their work force during a time of crisis there are plenty of examples of doing the right thing.
Photo above – Protesters placed empty chairs in front of Berlin’s Brandenburg Gate to protest hotel and restaurant owners’ plight.
Wall Street Journal 4.30.2020
German and Japanese unemployment rates forecast to remain low, while U.S. rate jumps, but longer-term outlook is less clear
Germany’s jobless rate will average just 3.9% this year, up from 3.2% in 2019, the IMF projects, though protesters still placed empty chairs in front of Berlin’s Brandenburg Gate to protest hotel and restaurant owners’ plight.
WASHINGTON—Workers in Germany and Japan are likely to weather an expected coronavirus-induced global recession better than their U.S. peers, thanks in part to stronger job-retention programs, recent data suggest.
Germany’s jobless rate will average just 3.9% this year, up from 3.2% in 2019, the International Monetary Fund projected this month. In Japan, the rate is forecast to rise to 3% from 2.4%. But in the U.S., it is expected to jump to 10.4% from 3.7% in 2019.
A German program intended to keep workers in their jobs during a downturn has been emulated in a number of other advanced economies, including Canada and Australia, which are also forecast to see lower unemployment than the U.S.
“The details differ, but the philosophy is the same,” said Jean Pisani-Ferry, a French economist and senior fellow at the Peterson Institute for International Economics. “Those schemes have basically absorbed most of the shock to the labor market.”
The German program, known as “Kurzarbeit,” is open to all businesses making social-security contributions regardless of size, and it was recently expanded to include temporary workers. The government sends cash directly to businesses so they can continue to pay employees even if virus-related lockdowns keep them from going to work.
With the government picking up as much as two-thirds of worker wages for up to a year, companies don’t need to cut as many employees if revenue falls. Ties between employees and employers remain intact, making it easier for businesses to start up again when the economy improves.
As of April 20, the number of companies applying for funds stood at 718,000, or about a third of all firms, according to the German labor agency.
By contrast, the U.S. job-retention program covers payrolls only through June and is mostly limited to small businesses with up to 500 employees. It is also “much more complicated,” Mr. Pisani-Ferry said.
Small businesses must apply to banks for government loans, which will be forgiven if they maintain their workforce, and then wait for approval. Employers have complained that the program is too small and plagued by delays and confusing rules.
The U.S. job-retention program covers payrolls only through June and is mostly limited to small businesses with up to 500 employees. In Las Vegas, volunteers prepare groceries to be given out at a food-distribution site.
Congress last month approved $350 billion for the so-called Paycheck Protection Program. That money quickly ran out, and Congress appropriated an additional $310 billion last week, after the IMF released its unemployment projections.
Officials estimate that about 23% of U.S. private-sector workers benefited from the first tranche of loans, and more will benefit as the additional money becomes available.
To help those who lose their jobs, Congress augmented unemployment benefits. Lawmakers also appropriated $292 billion in direct payments to households.
In Australia, which recently adopted a system similar to Germany’s, the jobless rate is forecast by the IMF to average 7.6% this year, up from 5.2% last year.
As in Germany, Australia’s JobKeeper program subsidizes businesses to keep workers employed. At 130 billion Australian dollars (about $85 billion), it is the most expensive government spending program ever implemented in the country.
Reserve Bank of Australia Gov. Philip Lowe said he hoped the government’s efforts would limit destruction of jobs.
“I am hopeful that unemployment might be lower than this if businesses are able to retain their employees on lower hours,” he said in an April 21 speech. “The unemployment rate would have been much higher than this without the government’s JobKeeper wage subsidy.”
Japan also recently expanded a business-subsidy program to include part-time workers to prevent mass layoffs of people like retail clerks. If an employer keeps a worker on the payroll at full pay, the government will cover 94% of the cost, up to about $77 a day. As with the German program, the higher the subsidy, the lower the incentive a firm has to lay off employees.
In Canada, the government will cover up to 75% of the wages of workers who would otherwise have lost their jobs due to the pandemic. Costas Christou, the IMF’s mission chief for Canada, said Canada’s wage subsidy should help limit unemployment growth. The IMF forecasts an average jobless rate of 7.5% this year, up from 5.7% last year.
Which model—the German or American—is best for workers and the economy in the long run may depend on the depth and severity of the global recession.
The German model is well suited for a relatively brief downturn, because companies that keep their workers won’t have to worry about hiring and training when the economic cycle turns, said Enzo Weber, an economist at the German Institute for Employment Research.
On the other hand, Mr. Pisani-Ferry said, subsidy programs like Germany’s could end up sustaining businesses that have no hope of surviving a longer downturn.
Defenders of the more flexible U.S. labor market believe American firms will be better positioned to survive and adapt to the changed economic landscape once the pandemic is over.
“The moment of truth will come when the confinement ends,” Mr. Pisani-Ferry said. “The idea that you can freeze everything for two months and unfreeze, obviously it’s going to be tested.”